Standing Committee C

[Mr. Joe Benton in the Chair]

Copyright, etc. and Trade Marks (Offences and Enforcement) Bill

Clause 1 - Penalties for criminal offences

Question proposed, That the clause stand part of the Bill.

Vincent Cable: I welcome you to the Chair, Mr. Benton. Given the way in which the Bill was dealt with on Second Reading, it seems that it is fairly uncontroversial and enjoys support throughout the House. However, I do not want to take matters for granted, so I shall recap on the essential points of this substantive clause to give members of the Committee an opportunity to respond if they wish. Unless major discussion points arise from that, I hope that we can proceed quickly.
 The key point under the clause is to harmonise trade mark legislation and copyright legislation. By that, I mean legal tidying up, not the introduction of new offences. Copyright theft is a significant offence. It is not a victimless crime, and it has major repercussions. It is theft in a service-based, knowledge-based economy of large sums—about £10 billion a year, but it could be more—and an activity that has a substantial impact on consumers. In many instances, it results in the diminution of quality, but it can involve dangerous products. Examples quoted on Second Reading were of toys and the adulteration of goods that could cause serious injury. Given the disparities in the treatment of different types of intellectual property crime, the most serious aspect is that copyright crime has come to be regarded as a soft option in the criminal community.

Michael Fabricant: I have been following the hon. Gentleman's argument with considerable interest and support. Is he aware that when the European Leisure Software Publishers Association intervened in attempting to stop such copyright breaches, it found that, in 80 per cent. of the cases, not only was there a breach of copyright, but such organisations were involved in other criminal activities, including the distribution of illegal drugs?

Vincent Cable: Yes, the hon. Gentleman is right. He has extensive knowledge of the computer industry and information technology, and I am sure that he has such information on good authority.
 One of the initiatives that prompted the Bill is the growing amount of evidence from the criminal intelligence service that large-scale organised criminals, including drug dealers, are becoming 
 involved in the business, and that it is a relatively safe option for them If they manage to convert the proceeds of their crime into copyright pirating, the maximum sentence is two years, which in practice would probably be reduced to one year. For a major organised crime syndicate, that would not be a deterrent. Several examples have been quoted in the past of the police trying to bring to justice a major criminal who is known to them who was involved in copyright theft. Large amounts of resources being expended on a major trial and a perfunctory sentence being passed obviously sends out the wrong signals. 
 I shall pull together the threads. Problems arise not because of any passive intent in the law but as a result of the sequence of legislation. Copyright legislation was introduced in 1988, with a two-year maximum prison sentence. Subsequently, under trade mark law, people began to become more aware of the criminal involvement and the seriousness of the theft, so tougher sentences of 10 years were applied. The Bill is an attempt to reconcile the two. 
 To reassure Committee members who may be wondering why people should go to prison for 10 years for what might be a non-violent crime and whether the term is excessive, the proposed term corresponds to comparable criminal sentences, such as those for fraud. In addition, only in the most severe cases, involving major criminals, is a 10-year sentence likely to be sought by the prosecuting authority and imposed by the courts. The Bill provides for summary sentencing in magistrates courts.

Nigel Waterson: As the hon. Gentleman knows, I support the measure, but I have a question about the tariff. All too often, we pass laws that specify maximum sentences as X or Y, but in reality tariffs produced by judges, with the blessing of the Lord Chancellor or the Lord Chief Justice—I forget which—determine on a day-to-day basis the sentences that are imposed. Is the hon. Gentleman reasonably convinced that, on paper, increasing or harmonising the maximums will translate into higher sentences on the ground?

Vincent Cable: I believe that there is sufficient awareness in the prosecuting authority and the judiciary of the seriousness of the offence. I think that only in a relatively few cases will an exemplary sentence would be imposed, which is essentially what we are talking about. Hon. Members may have noticed a slight qualification. The maximum, 10-year, sentences apply only to particular types of copyright offence—the most serious, which involve large-scale importation, such as smuggling, or the manufacture of goods. Ten years is the upper end of the range. I am sure that in practice the judiciary will recognise the most serious cases and will apply the maximum sentence if it believes that a deterrent is necessary. I am happy to respond to questions about the clause.

Nigel Waterson: I am pleased to be debating the Bill under your firm but fair guidance, Mr. Benton. You will have noticed that no amendments have been tabled. The Bill has support from all parties and quarters of industry and from consumer
 organisations, among others. It is rather like the dog that did not bark. I have received no briefings from anyone who is unhappy with it, and if other hon. Members have, I should be interested to hear about those anxieties. For once, this is a measure that has some unanimity behind it.
 I commend the hon. Member for Twickenham (Dr. Cable) on having been fortunate enough to come high in the ballot and on having adopted the Bill as his baby. It is refreshing to consider a measure backed by Liberal Democrats that is not anti-business, and for that we are grateful. I know how much work can be involved in introducing a private Member's Bill. Back Benchers do not have the back-up of the civil service—nor, indeed, do Opposition Front Benchers—and a great deal of effort is involved. It is right to debate the measure in such a friendly spirit. 
 A glance at the Bill's sponsors shows how wide the support is. It includes several of my hon. Friends, not least the Olympian figure of the shadow Attorney-General. We can therefore firmly say that everyone, including, I believe, the Government, supports the Bill. 
 If it helps you, Mr. Benton, I had proposed to make several comments about clause 1, and perhaps stray slightly further than I might usually to make some general points about the Bill, and confine my remarks to those, unless points are made in later, detailed debates. I shall discuss some important enforcement issues when we consider clause 6, which seems an appropriate point. I hope that that helps you. I shall proceed on that basis. 
 I strike a note that might be regarded as rather churlish. On any view, the Bill should be a Government measure. Although I do not suggest that the Bill is what is colloquially known as a handout, it would have been better if the Government had 
 found the time to introduce the measure. They are obviously keen on the Bill, and have, quite properly, allowed officials to assist in drafting explanatory notes and the like. It is a matter of principle whether time allocated for private Member's Bills, which is limited enough already, should be used to introduce what might otherwise have been Government legislation. As I have said, no amendments have been tabled, and there have been no hostile briefings of which I am aware. 
 The Bill is fairly technical, and that, no doubt, explains the paucity of the number of people listening to our deliberations. It deals mainly with procedural matters and penalties, rather than substantial matters of law on intellectual property. That is not to say that we do not recognise how important intellectual property is to the country. It is a great British success story, and encompasses a range of matters. CDs, computer software and Dyson cleaners are all examples of British ingenuity that can be called intellectual property. Such property needs protection because so much money and so many jobs are at stake. There is also the issue of public safety.

Michael Fabricant: I was interested to hear my hon. Friend's remarks about British intellectual property. Does he agree that it is fortunate that we hope to pass
 the Bill at a time when China has just joined the World Trade Organisation and can honour its obligations to international copyright law?

Nigel Waterson: My hon. Friend, who is something of a boffin on these matters, makes a telling point. I hesitate to use the word anorak. He is the Opposition's Barnes Wallis on these issues. He is right, and let us hope that constructive engagement with the Chinese, for example, will ensure that piracy—much of which is a far eastern phenomenon—will decrease.
 The Bill deals with criminal, rather than civil, aspects of intellectual property law. We accept that civil remedies are available and are pretty accessible to most people in the world of intellectual property. Intellectual property law is one of the big growth areas in British legal services, which are marketed across the world. 
 It is important that the Bill is seen to be debated properly, but it is also important that it is seen to receive the whole-hearted support of everyone in the House. That will show that Parliament takes the threat of intellectual property piracy seriously. The Bill is measured and does not try to do the unattainable. It takes a sensible approach to harmonising penalties and sorting out search warrants and forfeiture proceedings. It would make such proceedings more accessible, as long as issues of enforcement were tackled. 
 Some intellectual property rights owners might query whether the Bill goes far enough, but when we consider such legislation, our concern must be based on the art of the possible. I do not think that we have a sufficient answer to the question of enforcement. Much of the burden of enforcing the Bill will fall on the police or local trading standards officers, and we know how much pressure they are under already. The problems that the Bill attempts to tackle cannot be overstated, and I agree with the comments made by the hon. Member for Twickenham in his introduction. 
 We have heard from the Alliance Against Counterfeiting and Piracy, which might be called the midwife of the Bill. One of its briefings states: 
 ''The Alliance firmly believes that intellectual property theft should not be treated more leniently than theft of physical property''. 
That is important. All too often, it is possible for members of the public to think that the matters that we are discussing are unimportant. However, in terms of pure money value, they are frequently much more valuable than physical property, which seems at present to have wider protection. 
 We have all seen the briefings from the alliance, and other organisations, about the industries that they represent. The businesses that the alliance represents account for 5 per cent. of all employment in the United Kingdom, and they generated more than £80 billion for the Exchequer in 1999. Estimates of the losses caused by counterfeiting and piracy vary between £8 billion and £9 billion, and it is staggering that they do not include losses caused by counterfeiting and the piracy of business software, which I assume takes place on a massive scale.
 We have also received a more recent briefing from the alliance, which covers much of the same ground. However, it also touches on an important point that the hon. Gentleman made in his opening remarks, which is the relationship between white-collar crime and more serious criminality. The European Leisure Software Publishers Association has found that evidence of further crimes was uncovered in 80 per cent. of the raids that were conducted in 2001.

Michael Fabricant: I said that.

Nigel Waterson: My hon. Friend has made that point, and it bears repetition. It also reminds me of the situation that I have become involved with, because I represent a constituency on the south coast, of criminal gangs that have moved out of drug trafficking and other high-risk activities into tobacco smuggling, because the penalties for that are much lower but the rewards are almost as great. That provides another example of the flexibility of criminals in terms of how they make their ill-gotten gains. Crimes such as trafficking and trading in pirated CDs are almost as profitable to them—if not more so—than some of their other activities, but if they end up in court for committing them they are likely to face much lower sentences.
 The alliance has also provided evidence from the police service in Northern Ireland about the strong links between crime and terrorism. We know that terrorism is a business, as much as it is anything else; that is certainly the position in Northern Ireland. There is powerful evidence that organisations such as the Real IRA are involved in the counterfeiting of goods such as CDs and DVDs. There is also a reference to a threat assessment by the National Criminal Intelligence Service that states that organised criminals are increasingly getting involved in counterfeiting and the theft of intellectual property. 
 With regard to the matter under discussion, it is important not to lose sight of specific examples, of which there are many. I will refer to only a couple of them. It is important to state that we are talking not only about money and profits, but lost jobs. We are talking also about significant threats to public heath, and to people's lives. The example of the pirated Star Wars figures highlights that; they were found to contain 50 per cent. more lead content than is allowed by health legislation, and that is very dangerous for young children. 
 I was also struck by examples of the growing trade, particularly in the third world, in pirated pharmaceuticals. Fake Losec, which is an anti-ulcer drug, was impounded as it entered the United Kingdom. It had been made in Italy, and its manufacture was financed by Russian mafia bosses. Zantac, which is also an anti-ulcer drug, was also being manufactured illegally. 
 A disturbing report was published in The Lancet in June 2001. Researchers studied the pharmaceuticals that were available in Nigeria, and they found that counterfeiting was taking place on a massive scale. Almost 50 per cent. of the samples that they examined 
 had not been made by the usual manufacturers. That has vast implications for the United Kingdom and the third world with regard to resistance to drugs, side effects and people dying from, and continuing to suffer from, conditions that such drugs are meant to alleviate. For all of those reasons, and many more that time does not permit us to discuss, the Opposition welcome the Bill. We hope that it will have a painless and swift passage, rapidly become law and allow all the relevant authorities to enforce intellectual property rights. I commend the Bill to the Committee.

Nigel Griffiths: I welcome you to the Chair, Mr. Benton, and wish you, all hon. Members and everyone who assists us in our work as Members and Ministers a happy new year.
 On Second Reading, the Government said that the Bill would have our full support. Intellectual property crime affects businesses, consumers and society in general, and proven links exist with serious organised crime. We therefore welcome the Bill, which brings about rationalisation and harmonisation of the existing criminal provisions in intellectual property law, and we look forward to it being enacted. 
 Question put and agreed to. 
 Clause 1 ordered to stand part of the Bill.

Clause 2 - Search warrants

Question proposed, That the clause stand part of the Bill.

Vincent Cable: I shall say a few words about the clause, which introduces one of the three substantive changes. It is a means of widening the scope available to the police for seeking an effective search warrant from a justice of the peace, thereby making enforcement more effective.
 Currently, much of the investigatory work is carried out by trading standards officers in conjunction with the trade. Twickenham is the centre of the organisation called FACT—the Federation Against Copyright Theft—which does much of the investigatory work. However, the police become involved, and must secure a search warrant. Powers already exist under various pieces of legislation—in relation to intent to defraud, for example—and copyright provisions already exist under the 1988 Act. The powers are somewhat circumscribed, and under the existing legislation the police must be able to demonstrate that there is a good reason to believe that the people involved in copyright crime are involved in large-scale importing—the Chinese triad phenomenon—or that their UK operation is producing the goods in-house to sell them. 
 The most common manifestation of copyright crime is likely to be a stock of goods, which is available for sale through a street market. That, in itself, does not constitute ground for a search warrant. The purpose of the clause is therefore to widen slightly the scope for a search warrant to enable the police to secure it on good grounds of suspicion that a substantial amount of 
 counterfeit goods is involved for sale. They will have to prove that, and give evidence on oath—there will be no serious encroachment of civil liberties in terms of search warrants—but the clause will remove one of the potential anomalies under existing provisions. 
 One of the other tidying-up aspects of the Bill—a thread that runs throughout the clauses, some of which are complex—is that the nature of copyright and intellectual property is changing. Since the existing legislation was passed in 1988, new concepts, such as decoders for satellite television, have come into existence. Much copyright theft is associated with that—for which current legislation does not provide—and the Bill enables such concepts to be built into the law. All the policy implications will be dealt with next Monday when the House considers the communications Bill. The Bill before us deals with copyright theft in relation to search warrants, and applies it especially to aspects such as decoding machines and music recording, for which existing legislation does not provide.

Chris Bryant: I note the hon. Gentleman's comments on the changing nature of technology and how that inevitably affects copyright law, which is effectively a creative right, as Adam Smith would have it. How confident is he that the Bill will stand the test of the incorporation of the European copyright directive into British law?

Vincent Cable: I was in Brussels about six weeks ago and I asked that question of officials and Members of the European Parliament whom I met in the relevant directorate. I discussed briefly the Bill with them and they were confident that the two are compatible. However, as the hon. Gentleman said, we are discussing radically changing technology and, in five years' time, we may well need to amend the legislation.
 Question put and agreed to. 
 Clause 2 ordered to stand part of the Bill.

Clause 3 - Forfeiture: infringing copies, etc

Question proposed, That the clause stand part of the Bill.

Vincent Cable: This will be the last contribution that I shall make, unless members of the Committee wish to challenge other clauses.
 The clause is long and raises a separate set of issues. The reason for the length of the clause is almost entirely legal to achieve compatibility with different bodies of legislation. The clause relates to forfeiture, which is a problem that arises when the courts and authorities must make a decision about how to dispose of goods that come into their possession on a large scale. A typical problem arises when authorities accumulate many counterfeit goods because of a raid on a market stall and the stall holder cannot be prosecuted because he or she disappeared or gave a wrong name. There must be provisions in the law to dictate how to deal with the goods.
 Specific legal technicalities are associated with copyright because if one deals with trade mark law, the courts may order that the trade mark label is removed and allow the goods to be simply sold or disposed of. However, that would not be practical if considering counterfeit compact discs. The law must be couched to deal with the problem. Under the clause, the forfeiture provisions will be compatible with trade mark law, when appropriate, and will be brought under the all-embracing framework of the Consumer Protection Act 1987, which deals with the forfeiture of unsafe goods. 
 The clause is essentially a legal tidying-up operation that provides for the proper disposal of forfeited goods. 
 Question put and agreed to. 
 Clause 3 ordered to stand part of the Bill. 
 Clauses 4 and 5 ordered to stand part of the Bill.

Clause 6 - Search warrants

Question proposed, That the clause stand part of the Bill.

Nigel Waterson: I shall not detain the Committee for long. However, before we bid farewell to the Bill at this stage, I shall raise two or three points with the hon. Member for Twickenham about enforcement. No matter how well intentioned and excellent the provisions of the Bill may be, it is important that they are enforced after it becomes law. I fervently hope that it will be enacted. If there is not proper enforcement, the process in which we are involved will be almost a complete waste of time. Will the hon. Gentleman confirm that the Bill will not increase dramatically criminal penalties but will harmonise criminal penalties for cases in which there are current anomalies?
 I return to a point that I made in an intervention about the tariff, which I address more to the Minister and his advisers. It is desperately important that we do not pass maximum sentences. Ten years is a sensible maximum sentence given that we may be discussing hardened criminals—I shall not make the obvious joke about stealing the intellectual property rights to viagra—and serious sums of money are involved in such activities. For both reasons, a court may well wish to impose a sentence of up to 10 years. The tariff adopted after the Bill becomes law should reflect that. The committee of judges which decides the tariff may set it at a low rate when considering such crimes in comparison with others. We must send a message—and this is my only way of sending it to those who produce the tariff—that such crimes are potentially very serious, involve large sums of money and damage respectable businesses and our economy. 
 The second point, which I do not wish to labour, concerns the potential damage to people's lives caused by, for example, toys having a dangerously high lead content, badly constructed Christmas tree lights or counterfeited defective Bob the Builder toys. The 
 worst example is of drugs being pirated on a massive scale, especially in India, and then sold to countries in Africa and elsewhere. 
 Who will enforce the provisions? The explanatory notes are more helpful than usual. In paragraph 15, assurance is given that the Bill will not involve any additional public expenditure and that there may well be cost savings. The following paragraph states that 
''increases in manpower are not anticipated.'' 
That is a tad worrying because, as those of us who have been closely involved with our local authorities know, trading standards departments are under enormous pressure. They are almost always the first to experience cuts and have a massive range of legislation to enforce, ranging from noise and nuisance through to dodgy timeshare selling. Not matter how well intentioned and committed the men and women who work in those departments are, they do not have time to do everything. 
 The police would also be involved, and I should not need to mention the problem of police numbers and so forth. A question of priorities would arise. The Government must consider the issue of resourcing. In fact, I am surprised not to have received a brief from the Local Government Association on the under-resourcing of trading standards officers. Such points should be considered, otherwise what we do in Committee will make no difference. I welcome the Bill, wish it a fair passage and hope that it is on the statute book as soon as possible.

Chris Bryant: I do not want to delay the Committee for long. I struggled to find the right place in the Bill to make this point, so I am gratuitously landing it on the clause, because it concerns enforcement. The issue remains unresolved because it applies only in England, Scotland and Wales. It is impossible for us to legislate for the problem faced by the Spanish, French, German or Belgian Governments of people legally buying decoders in this country and watching material in other countries although they have only bought the copyright to watch that material in the United Kingdom.
 Such a problem is significant for many of our broadcasters. It is often unrecognised by platform operators, because they still receive the money, but the broadcasters who sell them the programmes are aware of the problem. People in Belgium, Spain and France who have legally bought set top boxes in the United Kingdom are using them elsewhere in Europe illegally. Sky is aware of the problem because people enter competitions that they can have watched only on a Sky box and give a Spanish address, although they bought the box in the United Kingdom. That issue must be resolved because it will not be covered by the European Union copyright directive. It is difficult for us to resolve it in Committee, but the fact that British goods that are made effectively with British licence payers' money yet are enjoyed by others who have not contributed to their manufacture is a matter about which we shall need to remain vigilant.

Vincent Cable: I thank the hon. Member for Eastbourne (Mr. Waterson) for his helpful and supportive approach to the Bill, which is appreciated. He wanted reassurance that the Bill would not lead to a proliferation of new sentences. That is implicit in all that has been said so far in our proceedings. We are talking not about a new crime, but one that already exists. In effect, all that would happen under the Bill is a process of harmonisation. It would bring the property law of copyright theft into line with the criminal sentencing provisions of trade mark crime. That would be a relatively limited change, and I should have thought that it was not beyond the scope of the judiciary to extend its range a little in that direction.
 The hon. Gentleman wanted to make sure that the authorities were aware of the seriousness of the offences and the potential for additional sentencing for the most hardened criminals. As he rightly said, that is a matter for the Minister. His third point was important and was referred to also by the hon. Member for Rhondda (Mr. Bryant). I accept that an Achilles' heel of the Bill is that some of its provisions will be the responsibility of local government trading standards officers, although much of the investigative work is done by the industry. Given that the industry loses large sums, it has an interest in undertaking investigative work and providing the authorities with the results of its inquiries. Much of the spade work is done by the industry, not local government officers. However, TSOs are clearly necessary. 
 In taking that point on board, I hope that the Minister will think in terms of joined-up government. As was said on Second Reading, the Chancellor of the Exchequer loses vast amounts of revenue as a result of copyright theft. Goods are going into the black economy. It has been estimated that about £1.5 billion of the Government's revenue have been lost, so it would be in their interest to ensure that trading standards levels of provision are sufficient to ensure that effective prosecutions take place. 
 I hope that much more emphasis will be placed on trading standards officers and minimum standards for local government under the future consumer Bill that the Government have promised us. Perhaps the problem can be encountered when that Bill is discussed. That point is important. I do not believe that it was intended as a criticism of the Bill that it would only be as effective as the enforcement troops. 
 I am impressed by the way in which the hon. Member for Rhondda shifted his focus of attention from the apostolic succession to copyright law within 24 hours. He made the valuable point about the way in which decoding technology can be applied offshore. As he said, there is nothing very much that we can do about it under the Bill because that application would be extra-territorial and difficult to apply. I hope that, when the European copyright directive passes through the House, account will be taken of the fact that copyright law is subject to weak treatment in some European countries. The hon. Gentleman's input to the debate was helpful.

Nigel Griffiths: Members of the Committee will know that the Home Office is currently reviewing its sentencing policy as a result of the Halliday report. There will be a review of how sentences are applied in practice. Trading standards officers are represented in the counterfeiting and piracy forum, which has brought together concerns about intellectual property crime. It is considering ways in which to facilitate and improve co-operation more generally to make enforcement more effective. That should assist TSOs and law enforcers, including the police who are the subject of the clause under discussion, and allow them to do their jobs more effectively. I cannot speak for
 TSOs in Spain, but the point was well made by my hon. Friend the Member for Rhondda. I hope that the Bill will help make convictions more certain. That, in itself, will act as a deterrent. If fewer people attempt such crimes because they know that there is a greater certainty of being caught, that will lower the cost of enforcement. With that, I commend the clause.
 Question put and agreed to. 
 Clause 6 ordered to stand part of the Bill. 
 Clause 7 ordered to stand part of the Bill. 
 Bill to be reported, without amendment. 
 Committee rose at ten minutes past Eleven o'clock.